How to get the maximum protection for your ‘Contract Works’

All contractors should have a Public & Product Liability policy in place. The Product Liability should protect them against any third-party claims for physical damage, or personal injury, caused by the failure of their product. These works can involve supply, build, service or repair.

However, this policy in its standard version does not cover the repair or replacement of the ‘product’ itself. So, what can be done to maximise your coverage to include the product itself?

Defining the ‘product’

The big issue comes in defining the ‘product’. In the case of contract works most insurers will define the ‘product’ as all installed materials forming part of the contract works. Damage to any of this will be excluded from the settlement.

If the contract works is something like the supply and replacement of a single water pipe in a bathroom, which later fractures causing substantial flood damage, this may not be too much of a problem. The flood damage would be covered to the existing property, the fractured pipe would not.

If the contract works is more complex, such as the renovation of a whole residential property including new bathrooms, where a water pipe later fractures causing substantial flood damage. In this instance, all works undertaken at the house would be considered the ‘product’ and as such any damage to installed bathroom units, flooring, etc, would not be covered under the policy in addition to the pipe itself. Worse still if the damage extends to the lower floors of the property, causing damage to newly installed decorations which were part of the contract, then this would not be covered under the policy either.

Most contractors will also have a ‘Contractors All Risks’ policy in place to cover their contract works, however this will only cover damage resulting from an insurable peril, such as fire, storm, etc, but will not extend to damage caused by the failure of a ‘product’ as per the examples above.

The Solution – Part Products Cover

The sensible way around this is to take out a policy extension under the Products Liability policy known as ‘Part Products Cover’.  This will extend the policy to cover damage to materials forming part of the contract works, with only the very specific faulty part being excluded – in the scenario above, the fractured water pipe.

James Airey, Account Manager, comments:

“Product Liability is a very important policy if your work is on construction sites.  However, we do advise our clients to maximise the effectiveness of their cover by taking out a Part Products Cover extension.  Our team will work with you to help find the right combination for your business.”

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